OPINION: How much profit is enough?

Most local shopkeepers are uncertain if they are making enough profit from their sales. Benchmarks are hard to come by. In the news, all we hear about are the companies that make vast fortunes – or lose them.

Money buys you a little happiness, Nick Powdthavee writes in the latest issue of FT Weekend Magazine.

“According to economist Richard Easterlin, part of the reason for this is that we care a great deal more about what other people earn than we do ourselves,” he explains. “For those whose most basic needs are already met, money buys additional happiness only if it can lead to higher status in society, which is hard when everyone else is getting richer over time.”

Bob Phibbs, whose blog on the worst case of local marketing is fascinating reading, has worked out that the average American business makes about three cents on the dollar in profit. “Yes, that is a really good business in average times,” he says.

It would be useful to hear from UK convenience retailers and others if this is a mark that should be nudged upwards or down. Establishing a benchmark could help a lot of businesses like yours be more confident in their planning.

Returning to Mr Powdthavee’s proposition: if you are making 3.5p in a market where 3p is the norm, then you will feel a little happier with your business and that you are making good decisions.